Bonds weakened today, even if only slightly.  It was enough to bring 10yr yields right up to the closest and arguably most significant overhead technical level at 2.07%.  If we consider that ceiling to be a small zone between 2.06 and 2.07, it came into play multiple times today including an after hours run just after the 3pm CME close.

All of the above adds up to a bond market that's staging for a potential breakout.  The most obvious conclusion is that tomorrow's Powell testimony is the yay/nay vote on the bond market breakout.  But it's so obvious that we can easily assume anyone else with the capacity to trade bonds is well aware of it.  Thus, the near-term landscape is already part of current trading levels.

Bottom line: there's no telling what sort of Powell comments are priced in to today's trading levels.  There's certainly some expectation for him to be a bit less rate-friendly than Fed Funds Futures would suggest.  The safest bet is to expect volatility--especially in light of the 10yr auction and Fed Minutes in the afternoon.  If 10yr yields break above 2.07%, it wouldn't be a surprise to see very quick follow-through up to the 2.10-2.12 area.  The saving grace is that MBS would likely outperform in that scenario.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
100-19 : -0-06
10 YR
2.0600 : +0.0260
Pricing as of 7/9/19 3:58PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
3:06PM  :  ALERT ISSUED: Negative Reprice Risk Increasing Slightly
10:45AM  :  ALERT ISSUED: Pressure at NYSE Open; MBS at Weakest Levels

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "10:53AM ET to be exact"
Matthew Graham  :  "yes"
Andrew Horowitz  :  "wasn't taper in Q&A as well?"
Matthew Graham  :  "Looking back at some past examples, Yellen's prepared remarks in Feb 2017 caused a quick move and reprices"
Matthew Graham  :  "Yep, there's risk both at 10am and then from around 10:15 on"
Andrew Horowitz  :  "Irrational Exuberance was in the Q&A"
John Tassios  :  "biggest risk is not prepared remarks, biggest risk is a possible gaffe during Q&A. Most of the questions will be boring, but some will be interesting"
Matthew Graham  :  "sometimes the prepared remarks get a reaction, but it's always possible something from Q&A will be the big ticket"
Matthew Graham  :  "speech generally released as prepared remarks at 10am. Then Q&A usually starts 5-10 minutes later, BUT it starts with some stupid rambling speech by whoever is in charge of the FSOC at the time, so Powell doesn't get rolling until 10:15am usually."
Peter Lassig II  :  "I was thinking the same thing, MG. How quickly do you think the testimony will go?"
Matthew Graham  :  "depends how early you get rate sheets"
Peter Lassig II  :  "Anyone gambling into tomorrow to see what rates do during Powell's testimony? Seems like a risky move to me."
Steve Stone  :  "3 cpn could technically include note rates between 3.25% and 3.75%. 3.5 cpn could include 3.75 to 4.25%. Historically most cos put the rate that is 0.75 over the coupon in the next higher coupon (i.e. 3.75 could pool as 3.0 cpn or 3.5 cpn)"
Dustin McAlister  :  "MG - refresh me on something? GNMA 3.0 is what I would watch for rates of 3-3.375 on va loans?"

Economic Calendar
Time Event Period Actual Forecast Prior
Tuesday, Jul 09
13:00 3-Yr Note Auction (bl) 38
Wednesday, Jul 10
7:00 MBA Purchase Index w/e 269.3
7:00 Mortgage Refinance Index w/e 1925.6
10:00 Wholesale inventories mm (%) May 0.4 0.4
10:00 Powell Congressional Testimony *
13:00 10-yr Note Auction (bl)* 24
14:00 FOMC Minutes *